Cuba Struggles, Turns Out the Lights to Save Economy

It's hard to find a spare tire in Cuba these days, or a cup of yogurt. Air conditioners are shut off in the dead heat. Factories close at peak hours, and workers go without their government-subsidized lunches.

Cuba has ordered austere energy savings this summer to cope with rising budget deficits and plummeting export profits, and the Communist Party Central Committee on Friday lowered 2009 economic growth projections by nearly a full percentage point.

The committee also announced that it was suspending plans for the first Communist Party congress in 12 years in order to deal with the financial crisis.

A report in official Cuban newspapers cited President Raul Castro as saying the island is struggling through a "very serious" crisis and hinted that further belt-tightening was on the way.

The government already has imposed conservation measures even as it continues to get free oil for services from Venezuela, fueling rumors that Cuba is selling President Hugo Chavez's crude on the side to raise cash.

More likely, the shortages result from a global recession that hit an already struggling economy still reeling from last year's hurricanes. President Raul Castro scolded Cubans in a national address Sunday to work harder because they have no one to blame but themselves.

"The only thing I know is that this is lousy," said one 27-year-old who only gave the name Raul because he sells cement and housing materials on the black market. "I don't work. I find a way to survive."

The latest cuts are small compared with strict measures imposed during the so-called special period, when Cubans nearly starved after subsidies dried up with the collapse of the Soviet Union.

Nor are they as severe as the blackouts of 2004, when technical problems at power plants left much of the island in the dark for hours at a time. Fans and water pumps were idled. Milk and food spoiled, while electrical surges damaged refrigerators, televisions and other costly appliances.

Still, every bit of belt-tightening stings in a country where almost everyone works for the state and average wages are less than $20 per month.

The price of nickel, Cuba's chief export, is down more than 50 percent from last year, according to Toronto-based Sherritt International Cooperation, Cuba's largest energy partner.

The company's oil production on the island was down 19 percent last quarter compared to the second quarter of 2008, mainly because Sherritt suspended drilling earlier this year when Cuba fell behind on its payments.

The government and Sherritt have worked out a plan to pay down the debt, and the company says Cuba has been sticking to it. But the situation could have spurred the mandatory energy savings. Neither Sherritt nor the Cuban government would provide more details.

Or Cuba may be trying to save unused oil to bolster strategic reserves while prices are still relatively low, said Dan Erikson of the Inter-American Dialogue in Washington.

But he also said the strict measures lend credence to whispers that Cuba is selling Venezuelan oil overseas -- something the communist government did with some of the discounted oil it got from the Soviet Union.

"It's been alleged they've been selling Venezuelan oil on the side. They've denied that, but if they are open to doing it, now would be the time," Erikson said. "Cuba's in a real cash crunch."

Beginning June 1, the government ordered energy conservation measures as part of a broader plan to cut the national budget by 6 percent. Central planners also announced Friday they were revising their economic growth projections downward, from 2.5 percent to 1.7 percent. As recently as December, they had projected 6 percent economic growth in Cuba.

These days, most countries would cheer any economic growth. But Cuba counts what it spends on free health care and education, monthly food rations and other social programs as production -- making economic growth figures dubious.

The island's economic woes began in earnest with three hurricanes last summer that caused more than $10 billion in damage and wiped out some of the food and grains the government had stockpiled to insulate itself from rising commodities prices.

How much Cuba has spent on hurricane recovery is unclear. But Castro said the government has rebuilt or repaired 43 percent of the 260,000 homes damaged or lost in the storms.

Cuba consumed about 150,000 barrels of crude oil a day in 2008, of which 52,000 were produced domestically and 93,000 imported from Venezuela, said Jorge Pinon, an energy fellow at the University of Miami's Center for Hemispheric Policy. Half is used to generate electricity, according to Cuba's Ministry of Basic Resources.

Though the numbers leave the country 5,000 barrels a day short, Pinon said natural gas production last year covered the energy equivalent of 20,000 barrels of oil daily and kept the power plants running smoothly.

"Cuba, from a petroleum point of view, is balanced," he said. "It's not running out of oil."

So far the power-saving measures have been confined to state-run businesses and factories, though many Cubans fear they will soon hit residential users as well.

Workers at a tire factory in San Jose de las Lajas, a rugged farming town 30 miles (50 kilometers) south of Havana, said production is down and the factory goes dark when demand for electricity is high -- leaving gas stations and mechanics short on spare tires.

In the central province of Cienfuegos, a large dairy that supplies ice cream and other products to much of the country and exports cheese has been ordered to cut production, according to the Communist Youth newspaper Juventud Rebelde. Yogurt is scarce in Havana -- sold only in upscale grocery stores that cater to tourists and are too expensive for most Cubans.

Some government office workers say their hours have been cut to between 8 a.m. and 3 p.m., and others are being told to come in only twice a week.

State companies also have stopped offering employees low-cost lunches in worker cafeterias to save power. Other government offices, businesses, banks and stores have ordered air conditioners turned off for much of the day, rather than close early.

Customer service, never stellar in state-run institutions, has suffered even more. In the sweltering banks, barbershops and boutiques, listless employees are more interested in fanning themselves than serving sweating customers.